Mortgage demand surges as households lean harder on credit

Across the full calendar year, mortgage inquiries were up 8.2 per cent, marking the busiest December for home loan demand in three years.

New mortgage originations climbed 17.7 per cent year on year, despite a 13.6 per cent month-on-month dip.

Equifax’s chief solution officer, Kevin James, said the resurgence in inquiries pointed to a combination of policy and monetary support.

He said that the federal government’s expanded first home buyer (FHB) 5 per cent Deposit Scheme, alongside three cash rate cuts during 2025, played a considerable role in pulling demand forward, with buyers moving quickly to secure finance.

However, he warned that this momentum would be “sensitive” to rate decisions in 2026 - particularly if the cash rate rises, as widely expected.

“If rates hold or drop, we could expect this energy to carry well into 2026; however, any rate hikes could see this stalled,” he said.

Refinancing drives home loan inquiries

Refinancing remained a major feature of the mortgage landscape in December, accounting for 36 per cent of all home loan inquiries.

Many of these inquiries involved borrowers upgrading or restructuring with their existing lender, with same‑lender upgrade refinances up more than 20 per cent year on year.

Month on month, total mortgage demand eased 13 per cent from November levels.

James said this behaviour showed borrowers were not waiting passively to observe interest rate moves in 2026.

“With 36 per cent of all mortgage demand in December 2025 driven by refinancing, it is a good indication that existing borrowers are aggressively hunting for value,” he said.

“This activity could suggest that mortgage holders are acting now to protect themselves against any potential cash rate uncertainty as we move further into 2026. They aren’t waiting to see what happens; they are actively securing a financial position now.”

State-level patterns also revealed where demand was most intense, with Queensland, Western Australia, and NSW recording the strongest December nationwide growth in mortgage demand.

Big brands lead new loans as challengers seize switchers

The Equifax data pointed to an emerging split in the types of lenders winning new-to-bank business versus refinancing customers.

For new mortgages, mutuals and the big four banks dominated in 2025’s final month, recording double‑digit year-on-year growth in inquiries.

Mutual lenders posted the strongest rise in new mortgage inquiries at 39 per cent, with the major banks coming close behind at 27 per cent.

Meanwhile, non-major banks slipped 16 per cent, while non-banks/fintechs dropped 23 per cent.

James said this phenomenon showed that when Australians seek a large, new mortgage, many still lean towards lenders they view as familiar.

“It seems that when taking out that initial large debt, Australians are gravitating toward perceived safety,” he said.

However, he noted the pattern flipped once borrowers had entered the market looking to refinance.

“Large non-bank lenders (+40 per cent) and Tier 2 banks (+18 per cent) showed significant growth against themselves year-over-year,” he said.

“These lenders appear to be successfully scooping up the switching market, attracting established borrowers who are confident enough to look beyond the major banks for a better deal.”

Mutuals recorded a 13 per cent rise, while the majors came in at 12 per cent.

Fintechs, though smaller in absolute terms, also grew their intake of refinanced customers by 20 per cent.

According to James, the trend suggests that non-banks and other challengers are successfully targeting confident, established borrowers, who are willing to move away from big brands.

Personal loans and cards plug cash flow gaps

Unsecured credit demand also climbed in December, though less significantly than secured lending.

Overall unsecured inquiries rose 5.3 per cent year on year, driven by strong growth in both credit card and personal loan applications, even as buy now, pay later volumes plunged 21.2 per cent.

Full-year unsecured growth reached double digits for cards at 10.4 per cent and came in at 8.6 per cent for personal loans.

Credit card demand jumped 15.3 per cent compared with December 2024, yet pulling back 6.2 per cent from November as post-Christmas volumes normalised.

Personal loans rose 10.4 per cent year on year in December, marking the strongest festive-season reading in three years, with a slight 1 per cent month-on-month gain.

James said the surge in unsecured demand extended beyond traditional Christmas overspending.

“It’s clear that Australian households were actively seeking credit to manage the holiday season,” he said.

“However, this isn’t just about accessing new funds; it represents a deeper consumer reliance on credit.”

He added that banking transaction data showed a 35 per cent jump in the average amount spent on credit card payments between October 2024 and October 2025.

“To me, this signals that consumers aren’t just opening these accounts for a rainy day, they are leaning on credit to bridge gaps in their daily cash flow,” he said.

Auto lending contracts despite year-end sales

While housing and unsecured credit strengthened, the Equifax report revealed auto finance remaining under pressure.

Over the 2025 calendar year, auto loan inquiries slipped 1.3 per cent compared with 2024, while December demand fell 4.3 per cent from November levels despite end-of-year sales campaigns.

James said this was due to steeper mortgage repayments and mounting living costs, placing household budgets under ongoing strain.

“High interest rates hit auto loans particularly hard, and for many households, upgrading the family car is a major expense that can be deferred,” he said.

[Related: Three-quarters of mortgages say their financial health has improved]